Commodities tumble to four-month low as crude, gold lead losses

Commodities dropped to a four-month low, paced by declines in crude oil (NYMEX:CLZ13) and gold (COMEX:GCZ13), on signs of climbing supplies of raw materials at a time when the prospect of reduced Federal Reserve stimulus may cut demand.

The Standard & Poor’s GSCI Spot Index of 24 raw materials lost 1.7% to 611.72 at 3:03 p.m. in New York, after touching 611.65, the lowest since July 1. West Texas Intermediate fell below $95 a barrel for the first time since June. Gold reached a two-week low. Hog futures capped the longest slump in three months, and cotton fell to the lowest since January.

Production is poised to top demand for everything from coffee (NYBOT:KCZ13) to zinc as ample rains this year boosted global crops and demand waned for metals, grains and energy. U.S. crude inventories climbed to the highest since June, data from the Energy Information Administration showed Oct. 30. Commodity returns will be “mostly flat” in the next 12 months, and there are “significant downside opportunities” in gold, copper and soybeans (CBOT:SX13)(CBOT:SX13), Goldman Sachs Group Inc. said Oct. 18.

“You just don’t see that much enthusiasm for commodities among the big-money players,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “There are ample supplies for energy products, and U.S. production continues at near-record levels. The expectations for Fed tapering have also knocked down prices.”

The Fed signaled diminishing concern over higher borrowing costs and cited “underlying strength” in the economy, even as it maintained $85 billion in monthly bond purchases on Oct. 30. The central bank’s statement opens the possibility of reduced debt buying as soon as December, Citigroup Inc. and Barclays Plc has said.

Oil Supplies

WTI for December dropped to as low as $94.41, the cheapest since June 26. Gold futures for December delivery fell as much as 1.4% to $1,305.60, the lowest since Oct. 17.

Lower refinery-crude processing and rising oil production have contributed to a 6.6% gain in total inventories this year. The refinery utilization rate was 87.3% last week, compared with as much as 92.8% in July. Crude production rose to 7.90 million barrels a day in the week ended Oct. 18, the most since 1989.

The combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in the central U.S.

Natural gas futures capped a third weekly loss as the outlook for a mild start to November signaled reduced heating- fuel demand. Forecasters including MDA Weather Services in Gaithersburg, Maryland, predicted seasonal or above-normal temperatures in the eastern U.S. through Nov. 15. About 49% of U.S. households use gas for heating, according to the EIA.

Corn Tumbles

Corn tumbled to a three-year low in Chicago after increased rain aided planting in Argentina, while global supplies are set to gain amid record production in the U.S., the world’s biggest grower.

Copper stockpiles tracked by the London Metal Exchange, which have risen 49% this year, gained for a second straight day. Glencore Xstrata Plc, the metals producer and commodity trader, said yesterday that quarterly copper output surged by 34% as African mines added to volumes. Prices have declined 9.7% this year.